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A Historical Perspective An Interisle White Paper
Prepared by: Interisle Consulting Group, LLC 39 S Russell Street Boston, MA 02114 http://www.interisle.net Lyman Chapin +1 617 686 2527 firstname.lastname@example.org Chris Owens +1 617 413 3734 email@example.com
ISP Peering and Interconnection
About this Report
Studies of Internet Service Provider (ISP) interconnection arrangements have been performed from many different perspectives, including the technical architecture of exchange points, the business and economic models that underlie peering and transit agreements, and the interaction between market-driven interconnection arrangements and public policy (at both the national and international levels). These studies have been extensively reported and analyzed (see Sources and References). This report is intended to provide an historical context for, and concise summary of, the evolution of ISP interconnection—how it originated, how it developed, and how it is practiced today—without exhaustively reiterating information that is available from other sources. The goal of this report is to describe the way in which the self-organized and selfregulating structures that govern today’s global Internet—including the arrangements that enable ISPs to connect their networks to each other—have evolved naturally, over a period of roughly 35 years, according to principles that are deeply embedded in the Internet architecture. These structures are selforganized and self-regulating not because the Internet is an anachronistic “untamed and lawless wild west” environment, but because years of experience have shown that self-management is the most effective and efficient way to preserve and extend the uniquely valuable properties of the Internet. Following an introduction to ISP interconnection in section 1, section 2 of this report describes the way in which today’s model of ISP interconnection has evolved over the past 35 years in parallel with the evolution of the Internet architecture. Section 3 describes the economics and management structures that have emerged from that process to govern today’s Internet. Section 4 identifies new challenges that have emerged since the turn of the century to the traditional arguments for and against the regulation of ISP interconnection. Section 5 summarizes the conclusions of the report. Section 6 contains a list of sources and references.
Copyright © 2005 Interisle Consulting Group, LLC. All Rights Reserved
Beginning in 1989. Chapin has served as the chairman of the Internet Architecture Board (IAB). representative to the networking panel of the NATO Science Committee. and during almost three decades of international technical and diplomatic leadership has played a key role in the development of the network routing and interconnection architecture. and international standards committees responsible for network and transport layer architecture. protocols. and was separately incorporated in 2000 as Genuity.S. Chapin has also served as a Director of the Internet Corporation for Assigned Names and Numbers (ICANN). LLC.interisle. Copyright © 2005 Interisle Consulting Group. BBN operated the NSFnet regional network NEARnet.S. representative to the computer communications technical committee of the International Federation for Information Processing (IFIP TC6). standards area director for the Internet Engineering Steering Group (IESG). U. and is the co-author of Open Systems Networking—TCP/IP and OSI. He is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE). which became one of the first commercial Internet Service Providers (BBN Planet) in 1993. Mr. and protocol standards. Chapin was Chief Scientist at BBN Technologies. All Rights Reserved www. which (as Bolt. and the U.ISP Peering and Interconnection Page 2 About the Author Lyman Chapin has actively contributed to the development and evolution of the technologies and self-governance structures of what is now the Internet since 1977.S. the Special Interest Group on Data Communication of the Association for Computing Machinery (ACM SIGCOMM). Beranek and Newman) developed the hardware and software for the first ARPAnet nodes installed in 1969. Mr. He was a principal architect of the Open Systems Interconnection (OSI) reference model and protocols. service. co-founder and trustee of the Internet Society (ISOC). acquired two other regional networks (BARRnet and SURAnet).net . and policy framework that support today’s globally pervasive Internet. Before co-founding Interisle Consulting Group. and U. Mr.
for reasons that are intrinsic to the architecture of the Internet and how it has evolved. despite the fact that no single network operator could possibly provide Internet access in every part of the world. global. the nature of Internet interconnection agreements. circuit-switched telephony world. and studies by a wide variety of public and private organizations2 have repeatedly concluded that it represents the most effective and efficient way to provide ubiquitous public Internet connectivity without being either anti-competitive or inequitable. institutional. joined to each other by interconnection arrangements. LLC. Internet interconnection is fundamentally different from interconnection in the traditional. Bill Norton coins the roughly equivalent term Internet Peering Ecosystem: “a community of loosely affiliated network operators that interact and interconnect their networks in various business relationships. End users see the seamless. ISP Interconnection1 allows traffic originating at a source connected to one ISP’s network to reach a destination connected to another ISP’s network. Internet Peering Ecosystem (see Sources and References). Interconnection enables the Internet as a whole to be ubiquitously fullyconnected.S. and the number and variety of 1 In The Evolution of the U.ISP Peering and Interconnection Page 3 1 Introduction Internet Service Providers (ISPs) connect their networks to each other in order to exchange traffic between their customers and the customers of other ISPs. ubiquitous communication medium known as the Internet. the economics of interconnection. behind the scenes lie many individual networks.interisle. All Rights Reserved www.” 2 An excellent summary of the case that these studies collectively make for the unnecessity of ISP interconnection regulation is contained in FCC Office of Plans and Policy (now Office of Strategic Planning and Policy Analysis) Working Paper 32.net . around the block or around the world. and governmental entities. Copyright © 2005 Interisle Consulting Group. As a result. The unregulated marketdriven model on which today’s global interconnection arrangements are based has developed over the past three decades in parallel with the development of the Internet itself. The Digital Handshake: Connecting Internet Backbones (see Sources and References). owned and operated by many different corporate. Interconnection is the glue that holds the Internet together. the range of choices that are available to participants.
” www. at which two or more ISPs make technical and administrative arrangements to exchange traffic. Today internetworking.ISP Peering and Interconnection Page 4 participants in the market are different from their counterparts in the telephony world.interisle. The Information Processing Techniques Office (IPTO) of the Advanced Research Projects Agency (ARPA) of the U. who took 3 The standard Internet Protocol is the “IP” in the familiar acronym “TCP/IP.net Copyright © 2005 Interisle Consulting Group. LLC. 2 The Origins of Interconnection As we observe it today. All Rights Reserved . which enables the owners and operators of different networks to collaborate as business entities in the provision of seamless end-to-end Internet connectivity to all of their individual customers. noncommercial. 2.S. and governmental organizations. and interconnection. Department of Defense funded several projects to build homogeneous networks before Bob Taylor. it is a management feature necessitated by the fact that the ownership and administration of the physical components of the Internet infrastructure are distributed among many different commercial. there is an important distinction between internetworking. before LANs and PCs. which enables networks based on different telecommunication technologies and protocols to exchange data. “computer communication” meant connecting I/O and storage peripherals (such as card readers. and printers) to resolutely self-contained mainframe computers. Thus. using the standard Internet Protocol3. ISP interconnection is not an intrinsic technical feature of the Internet. terminals. In the 1950s and 1960s.1 Networking Neither internetworking nor interconnection were features of the Internet’s most distant precursors. Early efforts to connect computers to each other led to “networks” based on a variety of different proprietary communications technology and protocols. is the common operating mode throughout the Internet. interconnection takes place at specific public and private exchange points.
(b) no central control. Copyright © 2005 Interisle Consulting Group. it was Bob Metcalfe’s brilliant leap from ALOHA to Ethernet (at PARC in 1973) that brought the concept of stochastic (non-deterministic) channel access into the networking mainstream. but as the number of networks grew. which originated in at least three distinct places during 1961-1965: in Paul Baran’s work at the RAND corporation in Santa Monica.ISP Peering and Interconnection Page 5 over as IPTO head in 1966. All Rights Reserved www.interisle. 2) The concept of best-effort service. 2. in Leonard Kleinrock’s work at UCLA in Los Angeles. UK. the n-squared scaling inefficiency of pair-wise translation led to the idea of “internetworking”—creating a network of networks. culminating in the July 1968 ARPA request for proposals for the interconnection of four ARPA research sites into what would be called the ARPAnet. and the idea of contention for channels was widely familiar in the radio context. recruited Larry Roberts to design a “distributed communications network” which laid the foundation for the ARPAnet. 5 ALOHAnet was a radio network. CA. (d) variable routing of packets depending on the availability of links and nodes. Kuo. 4 In the early to mid-1960s. and (e) automatic reconfiguration of routing tables after the loss of a link or node. through 1970)5. and Binder. All three concluded that the strongest communication system would be a distributed network of computers with (a) redundant links. and in Donald Davies’s work at the National Physical Laboratory in Teddington. CA.2 Internetworking It is remarkable to realize that the very earliest thinking4 about what a “network of networks”—an “internet”—should be embraced the three key concepts that underlie the architecture of today’s global Internet: 1) The concept of packet switching. When there were just a few of these homogeneous networks. LLC. which originated in the multi-access channels of ALOHAnet at the University of Hawaii (by Abramson. (c) messages broken into equal-size packets.net . it was possible to exchange information between them by building a translator.
” after the serial number of the BBN report that described it.3 Interconnection The clearly evident usefulness of the ARPAnet to the U. The tradition of self-management by the people designing. whether foreseen or unforeseen. lines leased from the telephone company. Defense Department contractors who were permitted to use it led other U. The first papers describing “packet network interconnection” were published by Vint Cerf and Bob Kahn in 1973. Copyright © 2005 Interisle Consulting Group. LLC. From the beginning the ARPAnet was managed by an informal and mostly selfselected group of engineers and managers who began meeting as the Network Working Group (NWG) in the summer of 1968. PSS. and has carried through to the governance structures that oversee the Internet today—particularly the Internet Engineering Task Force (IETF). and operating the network was established at the very first NWG meeting. Datapac. and Transpac. Other packet networks. All Rights Reserved www. the ARPAnet was not an “internet”—each of its four computer hosts was connected to an Interface Message Processor (IMP) by a proprietary serial link and protocol6.ISP Peering and Interconnection Page 6 3) The concept of application independence—that the network should be adaptable to any purpose. later Cyclades (Louis Pouzin).net . installing. the ARPAnet began using IP in 1977. Government agencies to 6 7 Dubbed “1822.interisle.S.S. rather than tailored specifically for a single application (as the public switched telephone network had been purpose-built for the single application of analog voice communication). Initially the Packet Radio Network (Bob Kahn) and Packet Satellite Network (Larry Roberts). and the X. in 1969. using an ARPAnet-specific “host-to-host protocol” that was referred to as the Network Control Program (NCP).25-based networks that became Telenet. At the outset. were being developed at the same time7. 2. and the IMPs communicated with each other over 56Kb/sec. based on other protocols.
. NASA Space Physicists followed with SPAN.3.ISP Peering and Interconnection Page 7 develop similar networks8. to conduct research funded by a particular government agency). and Larry Landweber. CA (FIX-West). Department of Energy (DoE) built MFENet for its researchers in Magnetic Fusion Energy. and initially they did not. DoE. and NSF: the Federal Internet Exchanges at the University of Maryland (FIX-East) and NASA’s Ames Research Center in Mountain View. 8 The U.1 Federal Internet Exchanges The practical awkwardness of operating multiple non-communicating networks eventually led to the establishment of two exchange points for federally-funded networks operated by NASA. With the exception of BITNET and USENET. 9 Led by Rick Adrion. which linked academic mainframe computers. Eventually. disgruntled computer scientists9 who could not connect to one of the government-controlled networks established CSNET for the (academic and industrial) computer science community. David Farber.S. DoE's High Energy Physicists responded by building HEPNet. All Rights Reserved . and in 1981 Ira Fuchs and Greydon Freeman developed BITNET.interisle.net Copyright © 2005 Interisle Consulting Group. LLC. ARPA. the Federal Networking Council (for administrative matters) and the Federal Engineering Planning Group (for technical matters). The prevalence of highly restrictive AUPs provided little incentive for the networks to interconnect. based on the Unix UUCP communication protocols. AT&T’s wide dissemination of the Unix operating system encouraged the creation of USENET. 2.g. These interconnection points were managed by two informal groups of engineers and managers. these early networks were restricted to closed communities defined by an “acceptable use policy” (AUP) that specified the uses to which the networks could legitimately be put (e. The interconnection regime was designed primarily to isolate the regions within the emerging technologically uniform IP “internet” that were subject to different acceptable use policies. www.
Copyright © 2005 Interisle Consulting Group. All Rights Reserved www. A landmark agreement between NSF and ARPA allowed NSF grantees and affiliated industry research labs access to ARPAnet. because no mechanism existed to reconcile the different Acceptable Use Policies of the two networks. and established nameserver databases to enable any computing researcher to locate any other. we would say that the customers of one ISP (ARPAnet) could not communicate with the customers of another ISP (CSNet).” or interconnection without explicit accounting or settlement. BITNET. BITNET. as long as no commercial traffic flowed through ARPAnet.25 networks.2 CSNet and NSFnet The USENET. The turning point that eventually brought them all together was the CSNET project. and commercial X. The purpose of CSNET was to link all of the computer science departments and industry labs engaged in computing research.interisle. In modern terms.25 networks could not be connected to the ARPAnet (or to the other federal networks that were interconnected at the FIXes) because of the government policy limiting ARPAnet to government agencies and their contractors. contractual. the bureaucratic complexity of which daunted even the most fervent advocates of interconnection—until the CSNet managers came up with the idea that we now call “peering. and Peter Denning (Purdue University).ISP Peering and Interconnection Page 8 2.net .3. which was created in 198110 under a grant from the National Science Foundation . It provided TCP/IP interfaces with USENET. This agreement was the turning point at which the evolution of commercial network interconnection began. This disconnect persisted as both sides assumed that any agreement to exchange traffic would necessarily involve the settlement of administrative. and those who could not (connecting instead to CSNet). 10 by Larry Landweber (University of Wisconsin). LLC. and the X. David Farber (University of Delaware). financial. Anthony Hearn (Rand Corporation). The development of CSNet highlighted the disconnect between the “haves” and the “have nots” in the computing research community—between those who could find a government agency or contractor to sponsor their connection to the ARPAnet. and a host of other issues.
a NAP operator was required to provide and operate an interconnection facility on a nondiscriminatory basis. or MAEs) became increasingly congested. and in 1996.where any interested party could co-locate equipment and connect its network to the NFSnet backbone or to other networks. Bob Aiken.interisle. Ameritech. www. a high-speed backbone connecting its supercomputing research centers.3. privately owned and operated Network Access Points (NAPs). using routers. NSF handed over its management to commercial Internet Service Providers (ISPs). operated by Sprint. Hans-Werner Braun. many network providers began creating their own private NAPs. NSF also commissioned the development11 of a deliberate architecture of backbones and regional networks that introduced the idea of hierarchy into the Internet topology. Pacific Bell. using published pricing and established technical operating specifications. the potential complexity of hundreds or thousands of ad-hoc bilateral arrangements pointed to the need for 11 By Peter Ford. and MFS. 2. All Rights Reserved . which extended the commercial Internet exchange model yet further. as the National Science Foundation began the transition to private ownership and management of the NSFnet infrastructure.4 Commercial Internet Exchange Points As the number and diversity of NAPs increased. 2.net Copyright © 2005 Interisle Consulting Group.3.>> As the original NAPs (also referred to as Metropolitan Area Exchanges.3 Network Access Points In 1993. By 1990. LLC. the NSFnet had become the backbone of the modern Internet.ISP Peering and Interconnection Page 9 NSF went on to sponsor NSFnet. Under the terms established by the NFS. it established four geographically distributed. <<CIX in San Diego was the first to engineer the interconnection at the IP layer. and Steve Wolff. These NAPs were the first commercial Internet exchange points.
but the opportunity to achieve better performance. NAPs. operational support of routing equipment. Some providers were vertically integrated. particularly for destinations that would be several “hops” away using a public exchange. Any ISP could connect to one of the public Internet exchange points. The Copyright © 2005 Interisle Consulting Group.2) began to develop as soon as commercial ISPs recognized that their interconnection arrangements could be a source of competitive advantage. or via leased circuits of higher capacity. serving the same or different markets.k. Internet Service Providers. ISPs served end users by providing connectivity between them and the rest of the Internet. End users connected to ISPs by placing calls over the public telephone network to modem banks operated by the ISPs. 2. and backbone providers were the wholesalers of the emerging commercial Internet. to interconnect in ways appropriate to each.” which provided a uniform set of technical and administrative services (e. These exchanges provided a framework that allowed multiple providers of different sizes. It was at this juncture that there began to emerge a large number of privately operated NAPs. and operating philosophies. interconnection. connected to regional or backbone networks at NAPs or exchange points. led many ISPs to explore direct interconnection of their networks with those of other ISPs. All Rights Reserved www.3. operating in every business from high-capacity backbone traffic down to dial-up lines. however.net . scopes. and clearing and settlement of charges between parties). traffic metering.a.ISP Peering and Interconnection Page 10 an overarching.g. ISPs. ”exchange points. billing.5 Internet Service Providers If exchange points. This interconnection hierarchy did not. in turn. Others specialized in providing one form or another of connectivity to one or more specific markets. were the retailers. correspond to a strict hierarchy of ISPs and backbone providers as business entities.interisle. LLC. traffic routing based on sophisticated criteria. The economic incentives and tradeoffs that are so richly diverse in today’s Internet (see section 3. or ISPs. neutral policy framework within which providers could implement mutually beneficial cost-sharing interconnection agreements. a.
the interconnection arrangements between North American ISPs and networks in other countries initially were biased strongly in favor of the North American ISPs.S. could be an order of magnitude lower than the cost of a direct connection . the customers of every ISP could communicate with the customers of every other ISP. it was common for Internet users in Taiwan. Until relatively recently.net . The fear of Internet “balkanization” as a result of large ISPs refusing to interconnect with smaller ISPs is. with the Asian network operators paying the full cost of the trans-Pacific links.3.ISP Peering and Interconnection Page 11 growing number of ISPs. see. Copyright © 2005 Interisle Consulting Group. All Rights Reserved www. of 12 The topology of Internet interconnection has emerged over the past decade as an important factor in studies of Internet resilience and survivability. ensured that the Internet as a whole would always be fully interconnected. which meant that even where a link existed between. and more rapidly. which was connected to the ARPAnet much earlier than any other non-North American country. Germany and France. Edward J. Malecki’s “The Economic Geography of the Internet’s Infrastructure” (Sources and References). Because North American Internet users were overwhelmingly the sources. to communicate with other Internet users in Japan or Singapore over a path that led through an exchange point in California (MAE-West).12 2. whether or not any particular pair of ISPs installed an explicit public or private interconnection. A corollary to many of these studies is the observation that the selfhealing properties of the Internet architecture guarantee that the Internet as a whole will remain fully interconnected even if most of the direct connections between individual ISPs were removed. and the variety of different ways in which the rapidly expanding Internet services market drove the development of creative combinations of public and private ISP interconnection.interisle. in North America than in other parts of the world13. for example. in today’s Internet. completely unfounded. This imbalance arose both from the early absence of an exchange infrastructure in other parts of the world. LLC. 13 With the notable exception of the UK. and from the much more favorable (largely unregulated) economics of Internet telecommunications in North America than in most other countries. rather than the consumers. for example. the cost of connecting through an exchange point on the east coast of the U.6 Internet Exchange Points outside of North America Because the Internet developed earlier. for example.
local and global. 2) the provision of services.net . However. Interconnection is goverened by a wide variety of bilateral and multi-party arrangements.ISP Peering and Interconnection Page 12 Internet content. they had very little incentive to defray the cost of connections to other countries. As recently as five years ago.php.com/private/exchange_list. 60 of the 92 listed exchanges are located outside of North America. Copyright © 2005 Interisle Consulting Group. special-purpose and generalist. 3) detection of and response to denial of service attacks (and possibly other forms of distributed. involves a number of issues that go beyond simply splicing together traffic streams. at the time of this report. 3 Interconnection in Today’s Internet The fabric of today’s Internet is stitched together from a huge variety of links and individual networks. that semantically span multiple ISPs. all of which require cooperation and collaboration among multiple ISPs: 1) secure exchange of interdomain routing information.peeringdb. LLC. operational. and legal perspective. particularly “quality of service” (QoS) dependent services. multi-ISP attack that have yet to be seen). ranging from individual home users’ dial-up connections to globe-spanning networks of massive capacity. All Rights Reserved www. 14 A current list of Internet exchange points is maintained at https://www. the pressure to regulate international ISP interconnection in favor of non-North American ISPs has substantially evaporated. owned and operated by a literally uncountable array of providers: private and public. large and small. Market forces now drive ISP interconnection decisions in many other countries as effectively as they do in North America. from a technical. as dozens of viable regional Internet exchanges have emerged outside of North America14. ISPs in non-North American countries were determined to correct this imbalance by forcing North American ISPs to subsidize the cost of inter-regional links. administrative. financial. ISP interconnection.interisle.
3..g. The differences are observable both in the basic architecture of interconnection—the decentralized and self-organizing “Internet approach” to packet switching vs. LLC.25. and continued Copyright © 2005 Interisle Consulting Group.g. and other intrinsically multi-ISP exploits. The Internet approach has displaced: • • • other technologies (e. All Rights Reserved www. The Internet approach is driven by self-organizing. monolithic.1. and • other forms of governance (e. x. architectural.1 Interconnection Architecture 3. and compelling. the recent IETF proposal). etc.net . frame relay).ISP Peering and Interconnection Page 13 4) control of spam.. in the more familiar public switched telephone network (PSTN).g.). and governance policies and practices that encourage high-quality engineering. ISP interconnection operates very differently in the Internet than its counterpart does. the centralized and heavily-managed PSTN circuit switching—and in the policies and economics that govern interconnection arrangements. time and again. other business models (e. for example. business. regulated monopolies or governmentowned PTTs). broad interoperability. phishing. it is that the current approach relies on underlying processes that are flexible.1 The Internet Approach What can loosely be termed “the Internet approach” has become the dominant paradigm in networking. emergency warning (cf. SNA). other architectures (e. and 5) enforcement of national public policy mandates (universal service. point-to-point leased circuits.interisle. their ability to create and maintain technical. What has given vitality to the Internet approach isn’t simply that the current approach meets the needs of the current environment. wiretap. adaptive.g. end-to-end ownership of the transport infrastructure by a single provider). self-regulating groups that have proved.
ISP Peering and Interconnection Page 14 creation of value. Selfregulation has allowed the Internet to adapt quickly and efficiently to the rapid pace of change and innovation in telecommunications technology.1. called the “North American Network Operators Group” (NANOG). with a charter to promote and coordinate the interconnection of networks within North America 15 Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. and governance is managed by a self-organized. and this fact has often been cited as the key to the Internet’s phenomenal success.interisle.1.1. The IETF is unusual in that it exists as a collection of happenings. (see Sources and References). and no dues. to be effective at establishing workable standards and highly adaptive to the rapid growth and change that have occurred within the Internet. 3.net . In the 1990s. operations. within the Internet Society.1 Technical Standards Internet technical standards are developed through the activities of the Internet Engineering Task Force (IETF). coordinated by the Internet Architecture Board (IAB) and housed. Copyright © 2005 Interisle Consulting Group.2 Operating Principles and Practices Since the earliest days of the Internet.1. LLC. All Rights Reserved www. while truly representing global consensus and thereby keeping participants on board. members of the former NFSNET “Regional-techs” meeting formed an expanded group. operation. Almost every aspect of Internet technical development. It is the principal body engaged in the development of new Internet standard specifications. no members. and public policy. but is not a corporation and has no board of directors. self-regulating structure. administratively. The IETF is: “…a loosely self-organized group of people who contribute to the engineering and evolution of Internet technologies.”15 The “loosely self-organized” IETF and related organizations have proven. 3. the operators of interconnected networks have met both informally and formally to share technical information and coordinate operating principles and practices. over a 20 year history.
NANOG has been highly effective in allowing ISPs and backbone providers to coordinate their activities to efficiently provide seamless service to a broad market. In the Internet. or “lightbulbs. there are two key types of resources in play: Physical. and virtual resources.1. The fact that North American Internet users enjoy transparent access to the entire Internet. Another measure of the effectiveness of NANOG is that other regions of the world have replicated the approach and have developed or are developing similar groups.net . LLC.com”. constitute one highly visible class of valuable virtual resource in the Internet. with the technical infrastructure required to cause the names to perform their intended function. testifies to the success of the self-regulating NANOG model. Domain names.e. All Rights Reserved www. trademarks and service marks). including: • • • • • • • AfNOG—the African Network Operators Group SwiNOG—the Swiss Network Operators Group JANOG—the JApan Network Operators Group FRnOG—the FRench Network Operators Group NZNOG—the New Zealand Network Operators Group SANOG—the South Asian Network Operators Group PACNOG—the Pacific Network Operators Group 3. such as “coca-cola. Domain names combine aspects of traditional intellectual property (i. serving as an operational forum for the coordination and dissemination of technical information related to backbone and enterprise networking technologies and operational practices.1.com”. tangible infrastructure such as communications links and switching facilities. regardless of the ISP to which they happen to be locally connected. Copyright © 2005 Interisle Consulting Group.ISP Peering and Interconnection Page 15 and to other continents.3 Resource Allocation One of the most important governance functions in any domain is promoting an efficient exchange of value and allocation of resources.interisle.
to promoting competition.2 Interconnection Arrangements From a purely technical standpoint—that is. through a highly decentralized. marketdriven process • • The allocation of IP addresses The operation of the mechanism (also highly decentralized) whereby names are resolved to addresses. consensus-based processes. is an international. ICANN. the operators groups can establish a plan for deploying it. in which routers connected by communication links of various kinds compute routes through the Internet based on information they have received from hosts (end users) on any networks to which they are directly connected and from other routers. the Internet Corporation for Assigned Names and Numbers.” 3. the IETF can establish an addressing scheme (and has done so). All Rights Reserved www. an essential function for the proper operation of most Internet services. broadly participatory organization responsible for overseeing: • The allocation of domain names. From its own description: “As a private-public partnership. to achieving broad representation of global Internet communities.ISP Peering and Interconnection Page 16 Another important virtual resource is the IP Address. the numerical address by which each computer connected to the Internet is uniquely addressable. In its simplest form. Under any addressing scheme. ICANN is dedicated to preserving the operational stability of the Internet. there are only a fixed number of addresses available.1.net . an Internet exchange point is a physical place (typically a room in a building) in which Internet routers Copyright © 2005 Interisle Consulting Group. but there still needs to be a mechanism for allocating the addresses. and to developing policy appropriate to its mission through bottom-up. LLC.interisle. unencumbered by policy or economics—ISP interconnection is no more complicated (or controversial) than simple internetworking.
or to a direct connection to another ISP. there 16 In practice.interisle. using routing protocols such as the Border Gateway Protocol (BGP). it can quickly re-route traffic through some other exchange point. Copyright © 2005 Interisle Consulting Group. The most important difference between this model of Internet interconnection and the circuit-switching model of the PSTN is that the Internet dynamically selforganizes to find paths from one point to another without explicit preconfiguration or setup. the way in which traffic flows are managed at exchange points is much more complicated than in this example. but this is not the classic “holdup” scenario that can arise from simple refusal to interconnect in the PSTN world.net . the possibility that an ISP could find itself unable to connect its customers to some part of the Internet because one or even many other ISPs refused to interconnect with it17 is vanishingly small. In today’s richly-interconnected Internet. ISP A might learn.16 A similar arrangement obtains when two ISPs decide to connect their networks directly to each other. where call re-routing depends on the prior negotiation and provisioning not only of alternative circuits but also of switch ports and switching fabric capacity. and connect them to the exchange point routers.ISP Peering and Interconnection Page 17 are installed. When multiple carriers are involved. that a group of Internet users who are customers of ISP B can be reached through an exchange point to which both A and B are connected. ISPs that want to use the exchange point to connect to other ISPs run one or more links from their own routers to the exchange point. and then over B’s network. for example. LLC. All Rights Reserved www. without loss of data or manual re-configuration. 17 Some ISPs will refuse to carry traffic that originated with another ISP that has been “blacklisted” for sponsoring spam or phishing attacks. and decide to use the exchange point to reach those users. if an ISP’s link to one exchange point (or the exchange point itself) fails. In the Internet. of course. rather than at a third-party exchange point. this process is much less dynamic (and much less robust) in the PSTN. The ISP routers and the exchange point routers exchange information about where different groups of Internet hosts—identified by their IP addresses—are located. Traffic from users on A’s network to users on B’s network would flow over A’s network as far as the exchange point.
an interconnection agreement says “You carry some traffic for me. or (third example). regulations.net .speakeasy.mci.2 Interconnection Policy and Economics Interconnection policy refers to the way in which the technical and contractual arrangements that ISPs negotiate with each other to interconnect directly or at public or private peering points (Internet exchanges) are influenced by (a) the business objectives and policies of each of the parties. and (b) external mandates arising from laws. increasingly the market has become one in which networks publish their policies openly18. 3.net/network/peeringpolicy. 3. particularly when those parties are large ISPs. Copyright © 2005 Interisle Consulting Group. 18 Representative examples of large.2.ISP Peering and Interconnection Page 18 are simply too many available connection points. the fact that they have become increasingly public speaks to an increasingly transparent. LLC.” Interconnection agreements are often tailored very carefully and minutely to the specific circumstances of the parties involved. and the architecture of the Internet ensures that traffic will flow end-to-end regardless of where an ISP is connected. the Speakeasy policy (at <http://www.php>). public and private. and small networks’ peering policies are the MCI UUNet policy (at <http://global. or some combination of the two. in return for which I’ll do something—either carry traffic for you.interisle.com/uunet/peering/>). medium. participatory market.1 Interconnection Agreements At its most basic. While it was once the case that networks were quite private about their peering policies. and other public policy instruments that apply to the jurisdiction in which the interconnection takes place. Interconnection economics refers to the way in which interconnecting ISPs assess and manipulate the economic variables that determine the viability of interconnection as a business proposition. All Rights Reserved www. or pay you. Aside from the publicly available policies providing a useful look into the economics of peering.
it is possible to consider them all as variations on a common theme (see Table 1) : • Networks “A” and “B” connect to each other. accepts traffic originating within the other’s network. All Rights Reserved www.ISP Peering and Interconnection Page 19 The current environment is one in which a heterogeneous mix of network providers—large and small. An operator connects to an exchange. and/or for the customers of other networks to which it is in turn connected (transit). • Each accepts traffic destined for its own customers (peering). The provider charges a fee for carrying the other network’s traffic.net . Each charges for the volume of traffic it accepts from the other. ( It follows that if the value of traffic in both directions is equal. Neither network delivers traffic to third parties on behalf of the other. a (usually commercial) facility carrying connections from multiple operators. Copyright © 2005 Interisle Consulting Group. One operator. for delivery to the accepting network’s customers. which adhere to one of four basic models: 1) Bilateral settlements. the provider. 4) Multilateral exchanges. LLC. Each accepts traffic destined for its own customers and originating within the other’s network. As with bilateral settlements. Two operators interconnect. public and private—connect to each others’ networks under a variety of arrangements. local. There.interisle. two operators each accept traffic from the other. But no charge is made. 3) Transit. possibly through a thirdparty exchange point or other intermediary. and global. the operator settles through the exchange for traffic that others carry on its behalf and that it carries on behalf of others. the net settlement amount would be zero) 2) Sender Keep All. traffic is routed to other operators’ networks via equipment provided by the exchange and according to rules administered by the exchange. destined not only for its own customers but for third party networks with whom the provider in turn connects. national. When all the different network interconnection arrangements are considered.
19 Two recent studies of peering economics are reported in Economics of Peering and A Business Case for Peering in 2004 (see Sources and References). or it doesn’t. publicly-advertised factors include: • Geographic coverage of the two networks: either overlapping. or non-overlapping. and in the case of a paid arrangement (bilateral settlement or transit).2. such that a peering relationship would be symmetrical.interisle.ISP Peering and Interconnection Page 20 • The arrangement either includes a cash payment made by one network to the other (again. All Rights Reserved www. the pricing19 External. “A” accepts traffic for: Its own customers only Other networks to whom it connects “B” accepts traffic for: Its own customers only Other networks to whom it connects Other Financial settlement None Cash Through an Exchange Multi-Party Networks connect: Directly Nature of Agreement Bilateral Table 1: Any given interconnection arrangement can be characterized by choosing one value from each of the columns above. or preferentially choose interconnection partners where the peering relationship gives access to a desired technology. • The arrangement is either purely bilateral. LLC. • Technical factors: networks may require certain technical standards. 3. or it is a multi-party agreement. such that a peering relationship would extend each network’s geographic reach. possibly through a third party intermediary). Copyright © 2005 Interisle Consulting Group.2 Micro-economics of Interconnection Many economic and business-policy factors affect an individual ISP’s decision to peer or not to peer with another ISP.net .
some obvious (direct cash payment. it would lead to a higher perceived value and price than otherwise. in a perfectly fair market. In any given case.interisle. At a theoretical level. or access to a large user community. All Rights Reserved www. where as the origination of traffic was split more evenly between the two. Because so many idiosyncratic factors affect each interconnection decision. the arrangement is made on the basis of a perceived equitable exchange of value between the two interconnecting parties. Anticipated traffic volumes. Two arguments against intervention apply here: one addresses the argument itself and the other examines historical outcomes. others entirely idiosyncratic . for example. Routing: networks may require specific routing policies and practices. Additional. In some cases. it is extremely difficult to analyze the economics of any particular interconnection arrangement using external. where the value of the arrangement to each of the parties is determined by a number of factors. idiosyncratic factors apply. that certain bilateral relationships between overseas and US-based networks are “unfair” on the grounds that the cost of the transatlantic or transpacific link was borne entirely by the overseas network.net . The argument has been made in the past. Size: networks may choose to peer only with similarly sized networks.ISP Peering and Interconnection Page 21 • • • • Operational: networks may require a certain level of operational support. for example). should be borne by the two connected parties in proportion to the volume of traffic they Copyright © 2005 Interisle Consulting Group. European ISPs in one country were connecting to US backbones in order to send traffic back to a neighboring European country. if one network’s specific geography or customer mix or traffic mix dovetails with an important element of the other network’s strategy. cost-effective transit. LLC. the implicit assumption that the cost of a link. bearing the cost in effect of two transatlantic hops. For example. objective criteria in order to determine whether or not the market is distorted and the agreement gives either party undue advantage.
3 Macro-Economics of Interconnection In addition to examining the factors influencing a single interconnection arrangement. and that anything else is perforce distored. is flawed due to the additional factors other than traffic volume. discussed above. On a more pragmatic level.interisle. An essential characterization of a market is its liquidity. 3. does not mean that X’s customers will be unable to reach Y’s customers: X always has the option of buying transit from some third party who is in turn connected to Y.2. choice is intrinsic to the Internet’s routed. Models of interconnection economics have been developed by <<citations. as contrasted with the circuit-switched. it has been observed that the European networks now connect to each other at multiple exchange points within Europe. that led to the emergence of this more effective network topology. It was the rational. it is worth examining the overall characteristics of the market in which these arrangements happen.ISP Peering and Interconnection Page 22 originate. All Rights Reserved www. that influence the value of interconnection to either party. the overall economic environment in which interconnection agreements are negotiated can be characterized as a free market with a large number of players. including “Internet interconnection and the off-netcost pricing principle”: “The purpose of this article is to develop a framework for modeling the competition among interconnected Internet “backbone operators” or “networks. at risk of cutting its customers off from regions of the Internet) In addition to the intrinsic choice.“>> Copyright © 2005 Interisle Consulting Group. and not regulatory intervention. Just because ISP “X” can’t strike a satisfactory bargain with ISP “Y”. (Y has a strong incentive not to make the terms of interconnection too onerous for at least some well-connected peers. connectionless architecture. LLC. connection-oriented public telephone networks.net . Does a buyer or a seller have a choice of many parties to deal with? Or is there a monopoly or oligopoly limiting choice? In some sense. financial desire to avoid paying transatlantic round-trips to connect to one’s neighbor.
The presentation will be technical and geared toward an engineering audience. or other obvious criteria. 2005 ISPCON conference. There has. Equinix.interisle. 20 Jay Adelson. for example: “Trends in transport pricing over the past six months have created a disruptive change by lowering the barriers for small and regional networks to develop robust national backbones for application delivery. in fact. fewer choices. founder and CTO.net . On the other hand. uncompetitive. Is it hurting the market? In assessing this question. who would be able to form in effect a cartel and disadvantage their competitors. it has been claimed that the barriers to entry in the backbone business have been lowered. Recently. or signatures of a distorted. LLC.”20 It is worth following these predictions to determine their accuracy and applicability. Session announcement. it is important to understand what might be the symptoms. and damage to the end consumer. This presentation will review pricing trends and the opportunities that are being created for small and regional networks. been considerable consolidation in the ISP market. Copyright © 2005 Interisle Consulting Group. Given the idiosyncratic nature of peering decisions. tracking the number of backbone operators and the entry barriers to the backbone business is likely to provide insight into the dynamics of the market. a slower pace of innovation. resulting in the usual effects of reduced competition: higher prices overall. It will draw upon specific examples and case studies of ISPs that have leveraged this trend. implies market distortion. oligopolistic or monopolistic market. peering. network performance and business expansion. it is not clear that just because the cash economics of given a peering arrangement do not track the data transport volumes. geographic footprints.ISP Peering and Interconnection Page 23 It has been suggested that the free market operation of ISP interconnection would be threatened by consolidation and the emergence of a small number of dominant players. All Rights Reserved www. as well as a review of specific products and their price points.
voice is both the application and the driver for the architecture of every other part of the system.net . dealt with ISP interconnection at the level of packet exchange—how IP packets are conveyed across the boundary (physical and administrative) between different ISPs. which will force it to adapt. and at the IP layer a VoIP packet is indistinguishable from any other data packet.” Copyright © 2005 Interisle Consulting Group. All Rights Reserved www. are in many senses orthogonal to the operation of the Internet itself. The fourth. which has traditionally been the vehicle for global voice telecommunications. does not observe the same functional layering as do IP networks. and the architecture of the PSTN is highly application-sensitive. attention has been focused on interoperability at the application layer—VoIP in particular. for example. the final report of NRIC VI Focus Group 3 dealt with VoIP: “The recommendations and best practices included in this report address the interoperability of Voice over Internet Protocol (VoIP) and the Public Switched Telephone Network (PSTN). In the Internet. voice is just another application. LLC. In the PSTN. 4. interoperability between the Internet and the PSTN is freighted with serious difficulties. relating to external attempts to bypass the selforganizing aspects of the Internet approach and impose poicy. In 2000 the final report of NRIC V Focus Group 4 (see Sources and References). This comes about in part because the PSTN. More recently.interisle. Because the architecture of the Internet is application-insensitive. as it has to other challenges and changes over the past decades. This was the focus of NRIC V Focus Group 4. and represent a significant and potentially distorting force. In November 2003.ISP Peering and Interconnection Page 24 4 New Challenges The Internet approach to interconnection faces several new challenges.1 Multi-Layer Interconnection Arrangements Today: interoperability and interconnection at the packet level (architecture—the Internet hourglass model). as they have to equally disruptive challenges and changes in the past. The first three challenges described below are well within the scope of the “Internet approach”: the existing policy mechanisms are well equipped to adapt to these changes.
All Rights Reserved www. operating practices and policies. interconnection arrangements are likely to involve multiple layers of the Internet architecture. and representing a broad constituency. In every arena: technical standards. and others. 26).3 Traffic-Load Sensitive Peering Agreements Today: peering agreements are almost uniformly traffic-load insensitive. national governments). resource allocation.interisle. Copyright © 2005 Interisle Consulting Group. the economic decisions surrounding a provider’s decision to interconnect. which concluded at the time that balkanization was not likely to occur because of other forces. addressing the “Digital Divide” at a national or global level. universal standard of coverage. policy is established by self-organized.ISP Peering and Interconnection Page 25 With the rise of VoIP and QoS-dependent applications. (see OPP WP 32 pg. or controlling trans-border data flows). This will affect technical standards. LLC. As the Internet becomes more of a core enabler of human activities. resulting in a network infrastructure that does not provide a uniform. it may start to look like a tool for the achievement of public policy objectives (for example. inclusive organizations. operating practices. and the overall market. 4. 5 Conclusions Today's Internet is the way it is because of the way it developed. 4. This was anticipated by studies conducted in the late 1990s. 4. Possible emergence of a traffic-sensitive settlement system as ISPs in different situations try to deal economically with the asymmetry inherent in WWW. the terms of interconnection agreements.4 Government Intervention Government attempts to control various aspects of the Internet (ITU. operating with a high degree of transparency.2 Balkanization Potential for balkanization of the Internet as backbone ISPs try to differentiate themselves (competitively) by offering services only to their own customers.net .
pdf A Competitively Neutral Approach to Network Interconnection. continued growth of the Internet is a rising tide that lifts all boats.fcc.fcc. 34. for example). On the other hand.pdf Bill and Keep at the Central Office As the Efficient Interconnection Regime. either in the service of "improving" the Internet itself. and the policy makers would lose their mandate. global market in which the Internet operates. Atkinson and Christopher C. to redress perceived inequalities in access or pricing. http://www. the self-organized. FCC Office of Plans and Policy Working Paper No. Patrick DeGraba. http://www. which is an important source of the Internet's vitality. should refrain from action. Jason Oxman. Barnekov. Michael Kende. December 2000. At present.gov/Bureaus/OPP/working_papers/oppwp31. If the policy making organizations didn't respond to that imperative. top-down attempts to regulate.pdf Copyright © 2005 Interisle Consulting Group. 32. or in furtherance of orthogonal policy objectives (solving the “digital divide” problem. http://www. decentralized nature of the Internet. are contrary to the fundamental.fcc. but until such problems present themselves. no matter how well intentioned or carefully crafted. LLC. given the inherently decentralized native architecture of the Internet and the heterogeneous. which creates a strong bias toward policies that facilitate growth and efficiency.gov/Bureaus/OPP/working_papers/oppwp32. http://www.net . and run the risk of being destabilizing and harmful. Regulatory policy-makers should remain attuned to the possibility that future developments would lead to a less competitive environment. All Rights Reserved www. FCC Office of Plans and Policy Working Paper No.interisle. and watch for the signatures of a distorted market. September 2000. July 1999. self-regulating aspects of the Internet are thriving. 33.ISP Peering and Interconnection Page 26 This approach is nearly inevitable. December 2000. 6 Sources and References The FCC and the Unregulation of the Internet.gov/Bureaus/OPP/working_papers/oppwp34. FCC Office of Plans and Policy Working Paper No. FCC Office of Plans and Policy Working Paper No.pdf The Digital Handshake: Connecting Internet Backbones. the participants wouldn't follow. 31. Jay M.fcc.gov/Bureaus/OPP/working_papers/oppwp33. The incentives are well aligned: due to the network effect.
September 2004. Norton.doc> NRIC VI Focus Group 3 Final Report.net/resources/papers/asia-pac-ix-update/asia-pac-ixupdate-v11.pdf> Economic Trends in Internet Exchanges. November 2003. Paul Milgrom. Jean-Jacques Laffont. <http://www. No. <http://www.org/pubs/nric5/2B4appendixb.org/pubs/nric5/2B3finalreport. Peering and Financial Settlements in the Internet. Presentation at the 1999 Internet Society Conference (INET 99).net/info/wp20020625. April 2005.pdf> The Art of Peering—The Peering Playbook.pdf> Copyright © 2005 Interisle Consulting Group.equinix. Rob Frieden. Appendix B: Service Provider Interconnection for Internet Protocol Best Effort Service. and Jean Tirole. Summer 2003 pp.” New York City.org/inet99/proceedings/1e/1e_1. <http://www. Steve Gibbard. 1998. William B. LLC. June 1999. 370–390. Scott Marcus. Internet Peering Ecosystem. October 1999. < http://www.virginia. November 2003. Bill Woodcock.pdf> A Business Case for Peering in 2004.htm > Without Public Peer: The Potential Regulatory and Universal Service Consequences of Internet Balkanization. 14 September 2004. Norton.pdf> The ISP Survival Guide: Strategies for Running a Competitive ISP. Internet interconnection and the off-net-cost pricing principle. Marshall Friemer.pch. Patrick Rey.com/pdf/whitepapers/PeeringEcosystem. May 2002. September 2000. Cambridge: MIT Press (2000): 175-195.pch. Reprinted from The Internet Upheaval.nric. 34. University of Rochester. <https://ecc. Geoff Huston.pdf> Economics of Peering.com/peering/downloads/A Business Case for Peering in 2004. <http://www. and Pavan Gundepudi. RAND Journal of Economics Vol. 3 February 2005.edu/graphics/vol3/vol3_art8. FCC Network Reliability and Interoperability Council. Rajiv Dewan. 1998. NRIC V Focus Group 4 Final Report. 2000. Presentation to “Gigabit Peering Forum IX.net/documents/papers/Gibbard-peering-economics. William B. <http://www. All Rights Reserved www. Norton. Geoff Huston.ppt> Competitive Effects of Internet Peering Policies.net .xchangepoint.isoc. Bridger Mitchell.html> The Evolution of the U.stanford. <http://www. <http://www. <http://vjolt. Interconnection. Ingo Vogelsang and Benjamin Compaine (eds). 2.ISP Peering and Interconnection Page 27 Evolution of Internet Infrastructure in the Twenty-First Century: The Role of Private Interconnection Agreements.equinix. Presentation to NZNOG 2005 conference. Virginia Journal of Law and Technology. Fall 1998.student. William B. February 2005.S.edu/~milgrom/publishedarticles/TPRC 1999. and Padmanabhan Srinagesh. FCC Network Reliability and Interoperability Council.interisle.nric. Wiley Computer Publishing.internet peering.
<http://www. MIT Press. Bellheads: Research into Emerging Policy Issues in the Development and Deployment of Internet Protocols. Netheads vs. All Rights Reserved www. Edward J. LLC. McKnight and Joseph P. Susan Harris and Paul Hoffman. 1997. May 1999. October 2002.com/pub/bellheads. < http://www.interisle.edu/econgeography/2002_04.html> Copyright © 2005 Interisle Consulting Group.org/tao> The Economic Geography of the Internet’s Infrastructure.tmdenton. Timothy Denton.ISP Peering and Interconnection Page 28 Internet Economics.net .clarku.ietf.). Malecki. Bailey (eds.pdf> Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. Lee W. <http://edu. October 2004.
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